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Investing in America’s next energy bonanza

After a long period of energy scarcity, the United States has emerged into a new dawn of relative energy abundance and strength. This abundance is not the product of good fortune, nor is its continuity a foregone conclusion. We must consider how we got here and use that insight to identify a clear path to the growth and prosperity that America deserves.

Much of the foundation of America’s energy renaissance — in shale oil and gas, renewable energy, and other technologies — can be attributed to federally-funded technology research and development that has occurred over many years, enjoyed bipartisan support, and which the private sector has relied on to help to commercialize market-creating technologies.

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Those investments have had a profound impact on America’s economy. A 2015 study from the Harvard Business School and the Boston Consulting Group found unconventional oil and gas development added more than $430 billion to U.S. GDP in 2014 — supporting more than 2.7 million jobs that pay double the U.S. median wage. In 2015 there were 769,000 Americans working in the renewable energy sector alone.

Federal investments in energy innovation are also important to America’s long term competitiveness. The United States has long dominated global science and technology, but the spoils of that supremacy are increasingly at risk. Recent assessments of global innovation ecosystems peg the United States anywhere from fifth to tenth, dragged down by the insufficient investment in energy R&D relative to the size of our economy.

The global energy market is more than six trillion dollars and investments of $1.8 trillion in 2015 alone are the result of fierce global competition to meet the enormous growth projected in the global market.

Investments in R&D are absolutely critical in an energy sector where many technologies are capital-intensive and long-lived, requiring large up-front cash investments with slower returns than most investors are willing to tolerate.

The fact that energy is a commodity also means new energy technologies have to compete against incumbents on price alone. Market forces dictate that the private sector underinvest in energy research, especially early stage, basic research.

The American Energy Innovation Council (AEIC) is a group of business leaders and executives that we chair, which advocates for an increased commitment to American energy innovation. Our experiences as executives have shown us that not only are federal investments key to developing new technologies, but that those new technologies enhance our competitiveness, create new jobs and sometimes even new industries.

Critics of federal support for energy innovation have suggested that the private sector will adequately invest in those energy technologies worth supporting and that federal investment merely crowds out private funding for research.

We’ve already highlighted the primary reasons: high capital costs, high degrees of technical risk, and lengthy time horizons all make it nearly impossible for private companies to justify these risks to shareholders. Instead, examples abound of the value of federal energy R&D investments and the public-private partnerships born out of that research that have been so critical to America’s prosperity.

Clean, safe and affordable energy is vital to our economy. As business leaders, we know the private sector can be mobilized to meet these needs, but we also know the government has a critical role to play as well. The opportunities to accomplish these goals while reaping enormous economic benefits are vast — if we invest in them.

Norman Augustine is former Chairman and CEO of Lockheed Martin and served as Undersecretary of the Army; Charles Holliday is former Chairman and CEO of DuPont. They are co-chairmen of the American Energy Innovation Council.

The views of contributors are their own and are not the views of The Hill.